Updated from 11:01 a.m. ESTGeneral Motors ( GM) and the United Auto Workers union separately criticized Delphi ( DPHIQ) Friday as the bankrupt auto supplier said it would file motions in court to void its agreements with them. GM's former subsidiary also unveiled plans for a major restructuring that will eliminate a quarter of its salaried workforce and unload as many as 21 U.S. plants. Delphi filed two motions Friday morning seeking to reject its U.S. labor agreements and to modify retiree benefits. It will also seek to terminate unprofitable supply contracts with GM. Court hearings have been scheduled for May 9 and 10, giving the parties a five-week period so they can continue working on agreements before the hearing. The court also directed the parties to promptly "meet and confer" to resolve the motion. In three-way negotiations between Delphi, GM and the United Auto Workers, no agreement has been reached in lowering wages paid to Delphi's hourly workers as part of the parts supplier's push to lower its labor cost structure in bankruptcy court. If Delphi's union contracts are ultimately voided, workers are threatening work stoppages that could cripple the company, along with GM, which depends on a steady stream of parts from Delphi for its production lines. Delphi recently proposed lowering hourly wages to $22 from $27, marking an increase from its proposal last fall of lowering wages to $12.50 per hour. Under the latest proposal, Delphi's hourly wages would be reduced to $16.50 per hour next fall and workers would be paid $50,000 as a "wage buydown" payment. "Delphi's proposal goes far beyond cutting wages and benefits for active and retired workers," said the UAW in a statement. "Delphi's outrageous proposal would slash the company's UAW-represented hourly workforce by approximately 75%, devastating Delphi workers, their families and their communities."
The union said it will be "impossible to avoid a long strike" if the court rejects the contract and Delphi imposes the terms of its last proposal. Meanwhile, Delphi expressed optimism that an agreement will still be reached. "Although today's court filings are necessary to protect our businesses, we have not left the negotiating table," Delphi said in a statement. "We have made considerable progress in recent weeks, and we intend to stay at it until we are finished." The company also called on GM to cover a greater portion of its costs and make other concessions. It delivered a letter to the automaker Friday that called for changing more than 400 recently expired commercial agreements to terms more agreeable to Delphi. "We simply cannot continue to sell products at a loss," said the parts supplier. For its part, GM expressed displeasure that Delphi is seeking to void its contracts. "We're disappointed that they would seek to reject some of the commercial contracts," said GM spokesman Jerry Dubrowski. "They've made it clear that they're doing this as a step in the bankruptcy process. For the moment, they have no intention of actually following through on this but they want the option at their disposal. So, there's more work to be done there to reach a consensual agreement, so we'll just continue to work on it." "GM expects Delphi to honor its public commitments to avoid any disruption to GM operations," said Rick Wagoner, GM chairman and chief executive, in a statement. On the ongoing labor negotiations, Wagoner said, "Motions to reject labor agreements are fairly common in reorganization proceedings and we have seen this approach play out to agreed resolutions in other cases. GM will continue to work with Delphi, its unions and the court to achieve a consensual agreement that makes sense and is financially viable for all of the parties."
Shares of GM were recently down 7 cents to $20.99. As part of its restructuring plans, Delphi identified eight core manufacturing sites in the U.S. that it will definitely continue to operate. Its other 21 U.S. plants will be considered for sale or closing. It expects to slash its salaried workforce by as many as 8,500 employees, or 25%. It said up to 40% of its current corporate officer positions will ultimately be eliminated. It also plans to freeze its current pension plans for hourly workers on Oct. 1, and for salaried workers at the beginning of 2007. It expects to complete its U.S. restructuring and emerge from bankruptcy in the first half of next year. "We believe it is highly likely that the auto and auto-parts stocks come under considerable short-term pressure," said Joseph Amaturo, analyst with Calyon Securities, in a research note after the announcements. "That said, we continue to believe Delphi, the UAW and GM will resolve the negotiations amicably and without a strike. However, we expect there may be a few more weeks of uncertainty about the resolution."